co product costing detailed trng

Thursday, November 27,

2014

1

Product Costing


2014

2

Product Cost Controlling -

Benefits

Legal Requirements

l Valuation of:

n Raw Materials

n Semi finished Goods

n Finished Goods

l Work-in-Process

l Reserves for Losses

Management Requirements

l Support cost reduction

concepts

l Strategic Decision Support

n which products

n where or how to produce

l Operating Decision Support

n pricing of products

n effectiveness of manufacturing


2014

3

What can Cost Object

Controlling do for me?• What actual costs did we incur in our area

in the current period?

• What costs were we expecting based on the quantities manufactured?

• Are some product groups performing significantly better than others?

• What is causing these variances?

• What are the scrap costs of our new line?

• Did continuous improvements show cost effects?


2014

4

Product Controlling by Order

When to Use?

• Very flexible production

environment

• High set-up costs

• Full cost tracking needed

• Controlling by individual

production lots needed

• Example: Order related

production

Work center 3

Lot

Lot

LotWork center 1

Work center 2


2014

5

Product Controlling by PeriodWhen to Use?

• High volume production

• Stable and continuous

production

• No individual lot oriented

controlling needed

• Collecting costs on product

cost collectors

• Example: Repetitive

production

Line

am-120

am-200

am-line1

am-110 am-210 am-220

am-100


2014

6

Product Cost by Sales OrderWhen to Use?

• Cost and revenues collected by sales

order irrespective of manufacturing

scenario

• Collecting special sales costs on

sales order

• Tracking Funds committed

• Calculating Work in process and

Reserves with results Analysis

• Example: Controlling complex Make-

to-Order Production

MMMSales Order


2014

7

Product Cost Controlling -

Components

Work in process

Scrap

Variances

Settlement

Planned

costs,

Actual

costs

BOM RoutingRoutingOrder

Material $

Labor $

Overhead $

Process $

Total ...

Prices for Materials

Prices for Activities

Prices for Processes

Overhead

Cost estimate:

Standard costs

Product Cost Planning

Value Structure

Quantity Structure:

PP Master Data

Final Costing

Period-End Closing

Preliminary Costing,

Simultaneous Costing

Cost Object Controlling


2014

8

Product Cost PlanningPC- Planning stage

Quantity StructureQuantity Structure

Plan Overhead rates:Energy = Rs.10 / hr

Running = Rs.80 / hr

Value StructureValue Structure

Routing

BOM +

Men Cost = Rs. 20 per kg

Standard BOM

to give standard

material cost

Standard Routing

to give standard

overhead consumption

quantity

Standard Overhead rates

Standard Material

consumption

cost

Standard

Overhead costs

Standard cost of Manufactured goods includes the planned cost of Raw Material

and Planned cost of Overheads


2014

9

Cost - Object ControllingPC - Actual stage

Cost centers

Production Operation

FinancialAccounting

Activities

Overhead expenses

Cost Sheet

Overhead costs

posted to budget

cost centers

Overhead costs re-

allocated in between

cost centers

Overhead costs

allocated from Cost

Centers to Production

Operations using two

methods

Standard cost of FGOverhead costs

allocated to Finished

Goods at standard

overhead rates

Variances

Overhead variance are

accounted along with

Production varianceFinished Goods


2014

10

Production Order: Process Chain

Production Order CreateOrder archived / deleted

Schedule

Availability check

Settlement

Calculate costs

Variance calculation

Final goods receipt

WIP calculation

Revaluation

Material issue

Release of order

Shop paper printing

Overhead/Process costallocation

Production

Order

Order Execution

Partial goods receipt

Period end closing

Simultaneous costing


2014

11

Allocation of Overhead Costs

Activity type allocation Process allocation

Overhead

surcharges

Cost

allocation

Activity

quantity

X

Price

Process

quantity

x

Price

Cost Center

Cost CenterActivities

Cost DriverCost CenterActivities

Direct activity

allocation

Production

Order

Production

Order

Production

Order


2014

12

Revaluation of Activities With

Actual Prices

Cost

Object

Production

Cost

Collector

Actual CostsRevaluation of

posted activities

Actual

Activity

Prices

Cost Center

Cost ElementCost Element

• periodic

• average

• accumulated

Price

Difference

xactivity

quantity

=cost

difference

Process

Order

Production

Order


2014

13

Overhead Surcharges

1 barrel

Warehouse Warehouse Cost CenterWarehouse Cost Center

Credit from overheadCredit from overhead

calculation: –200calculation: –200

SurchargeSurcharge

PercentPercent

20%20%

Production OrderCosting sheet COGM

Oil 1,000

Storage

overhead 200


2014

14

Period-End Closing: Work in

Process

Work in process is calculated for

each order and settled to Financial

Accounting and Profit Center

AccountingBY COMPANY BY PROFIT CENTER

PrCtr 1PrCtr 1

Production OrderCO-PC

Period Accounting

Revenues

- Sales deductions

- Total costs

+/- Stock changes

= Profit for period

EC-

PCAFI

Actual

Material 800

Production 1,200External 400Stock change – 1,000Order balance 1,400


2014

15

WIP Calculation Using

Actual Costs

WIP

Material: P-100

Settlement using

posting rules

8001,200

4002,400

1,0001,400

MaterialProductionOverhead

Plant activity

Actual Costs

FIFIEC-EC-

PCAPCA

CO-CO-

PCPC

-

1,400

-1000Delivery

400Overhead

1200Confirmations

800Material Withdrawals


2014

16

Posting of Work in Process

Work in Process 1,400

Apportionment for WIP

Material 800

Production 1,200

Overhead 400

To be capitalized 1,120

Not to be capitalized 280

WIP Stock change

ExpenseReserve

FINANCIAL ACCOUNTING

Profit Center ACCOUNTING

Division

Product group

Product

Postings

via

Settlement

Production Order


2014

17

Period-End Closing: Variances

Variances are calculated for each

order and settled

• with variance category to Profitability

Analysis

• as well as one amount to Financial

Accounting

BY COMPANY BY PROFIT. SEGMENT

•Product

group

•Distribution

channel

•Region

FICO-

PA

Material: P-100

8001,200

4002,400

-2,000

400

MaterialProductionOverhead

Goods receipt

Variances/scrap

Actual Costs

Cost of Sales Accounting

Revenues

- Sales deductions

- Cost of goods manufactured as

1st and 2nd contribution margin)

- Variances

= Profit for period

CO-

PC


2014

18

Variance Analysis

20

50100

Input Price

InputQuantity

RemainingInputoverhead 25%150,- (actual )

instead of100,- (target)

Resource-usage

Variances between the

planned prices and the actual

prices of the resources

Variances between theplanned input quantities andthe actual input quantitiesof the resources

Variance between the targetcredit (standard price) and the

actual credit(e.g., moving average price)

v

S

RemainingOutput

Variances between planned

costs and actual costs(independent of lot size) as

calculated in the delivery

Variances that cannot be

assigned to any other variancecategory, such as

rounding differences

set up

Outp .price

Lot size

variances:

output side

Variances caused by adifferent resource beingused than was planned

Variances that cannot beassigned to any othervariance category, suchas overhead surcharges

Rounding

differences

variances:

input side


2014

19

Period-End Closing:

Settlement

CO-CO-PCPC

Material: T-F100Quantity produced: 10 pcs.

Actual Costs 2,400,-Actual Costs 2,400,-

Stock Change -2,000,-Stock Change -2,000,-

Variances 400,-Variances 400,-

Actual Costs

CO-

PCProduction Order

PERIOD ACCOUNTING

Revenues

– Sales deductions

– Total costs incl. Variances

+/- Stock - WIP Changes

= Profit in periodProfit in period

BY COMPANY

PrCtr 1PrCtr 1

BY PROFIT

CENTERFI

EC-PCA

COST-OF-SALES ACCOUNTING

Revenues

– Sales deductions

– Cost of goods manufactured

(1st and 2nd contribution

margin)

– Variances

= Profit in periodProfit in period

BY COMPANYBY PROFIT.

SEGMENTCO-PA

SETTLEMENTFI


2014

20

Settling the Order to the

Material

R

S Standard price control

V

Moving average

price control

Stock Price difference

2,000 400

Plant activity

2,400

Warehouse

stock?

Quantity in stock = 10

Quantity in stock = 1

MM

FI



2,400

Plant activity

2,400 FI


CO-CO-PCPC

Material: T-F100Quantity produced: 10

Actual Costs 2,400,-Actual Costs 2,400,-

Stock Change -2,000,-Stock Change -2,000,-

Variances 400,-Variances 400,-

Actual Costs

CO-

PCProduction Order


2,040 360

Plant activity

2,400 FI



2014

21

PA Transfer Structure

R

PA TransferPA Transfer

AssignmentAssignmentVarianceVariance

CategoryCategoryCost ElementCost Element

GroupGroupQuantity/Quantity/

Value FlagValue FlagFixed/Fixed/

Var. FlagVar. FlagValueValue

FieldField

20

50100

PRICE

QUANTITY

MaterialA

MATERIALS

400000

400100

400200

Internal Activities

600000

620000 Text20

50100

PRICE

QUANTITY

MaterialA

MATERIALS

400000

400100

400200

Internal Activities

600000

620000 Text

1

1

1

1

3

3

3

3

10

20

30

40

MVARQ

AVARP

AVARQ

MVARP


2014

22

Information System: Contents

• Structure of the information system

• Overview standard reports for effective

controlling


2014

23

CO-PC Report Trees

Main tree

Product Cost Planning

Product Cost by Period

Product Cost by Order

Product Cost by

Sales Order

Costs for Intagible

Goods and Services

Actual Costing /

Material-Ledger

Information System

CO-PC

Order Selection

Component tree

Object lists

Detailed reports

Object Comparisons

Other Reports

Summarized Analysisy

PlantMaterial

Order Hierarchies


2014

24

Summarized Analysis -

Product Drill Down

Product-Drill- Down

++-

++

Power Plant IPower Plant IIIndustry

AutomotiveChemicals

1002

3459

3986

P-100

P-100

P-101

P-101

1,000

1,200

900

950

1,000

1,250

850

1,800

Order Material Plan Actuall Target / Actual

l Variance Analysis

l Plan / Actual

l Work in Process

Order Selection

Order Hierarchy

Detailed Reports


2014

25

Drilldown Reporting - Example

R

Plant 1000 Target Actual Price var . Res .-usage var . Quantity variance

Product group A 6,000 6,000

Product group B 12,000 17,500 1,500 1,000 3,000

Product group C 5,500 7,500 2,000

Drill-down: Materials in product group B

Product group B Target Actual Price var . Res .-usage var . Quantity variance

Material P-100 2,800 4,000 1,200Material P-200 3,500 4,500 500 500

Material P-300 2,500 3,000 100 400

. . .

l Variance categoriesl WIP

l Actual costs

l Planned costs

l Plan/actual comparison

l Target/actual comparisonl Target/actual/variance

Material P-100 Target Actual Variances

Order 123 1,800 3,000 1,200

Order 456 400 400

Drill-down: Orders for material P-100

Standard Reports


2014

26

Order Summarization

Through ClassificationHierarchy Description

COPC-VAR

Controlling area

Material group 001

Plant 1000

Plant 1100

Material group 002

Material group 003

Plant 1200

Settings ->Planned costs/actual costs

50,000 59,000

30,000 30,500

20,000

32,000 33,500

82,000 92,500

65,000 68,000

197,000 219,500 Standard ReportsStandard Reports

Variances categories

WIP

Actual costs

Planned costs

Plan/actual comparison

Tgt/actual comparison

Tgt/actual/variance

28,500

Order with variances


2014

27

Thank You . . .